Is Sri Lanka Taxing Itself Into Economic Suicide?
Sri Lanka’s recent tax policies could seriously backfire, making it even harder for the country to attract investments and boost its economy.
Sri Lanka's credit rating is still in the risky zone Moody’s has it at Caa1 (very high risk) and S&P recently rated it SD (Which is Selective Default). Basically, investing in Sri Lanka is already seen as a extremely risky gamble. Adding more taxes won’t help.
Stats suggest Sri Lanka won’t realistically hit developed country status until 2060 or later. Right now, the focus should be on making the country as attractive as possible to foreign investors. Unfortunately, these new tax policies do quite the opposite,
- Capital Gains Tax
The CGT on investments jumped from 15% to 30%.
For comparison, the US CGT is no more than 15%, and they're even talking about lowering it to encourage growth.
Doubling the CGT in Sri Lanka will scare off institutional investors who are already wary of the country’s financial and political instability.
- Corporate Tax
The corporate tax rate for certain industries (like betting, gaming, liquor, and tobacco) went up from 40% to 45%.
While it might sound good for boosting government revenue, it could choke struggling local businesses. High corporate taxes, combined with a steep CGT, make Sri Lanka a hard sell for investors.
- 18% Tax on Foreign Digital Services
An 18% tax on digital services like daraz, alibaba It’s essentially taxing the electronic market, making online transactions more expensive for businesses and consumers.
- Export Tax
Adding an export tax is just shooting ourselves in the foot. which is the on profits we earn from selling goods and services to other countries.
The US constitution outright bans export taxes for a reason, Compared to countries like India, Malaysia, Philippines, and Indonesia, Sri Lanka is becoming less investment worthy. These countries often offer far better tax breaks and incentives to investors.
- Brain Drain in industry
Sri Lanka doesn’t have a strong manufacturing sector to fall back on. Plus, skilled workers are leaving the country in extremely high numbers, Skilled labor is a extremely limited resource in Sri Lanka, and we’re losing it fast to immigration. Let’s be real Sri Lankan salaries are awful, and only foreign companies offer somewhat decent pay and better working conditions. Local companies pay some of the lowest salaries in the world. By raising taxes on foreign companies, we’re basically cutting the salaries of the last remaining skilled workers here, pushing them to migrate even more. This is just economic suicide. Without skilled labor, Sri Lanka will never move forward
Sri Lanka’s recent tax policies could seriously backfire, making it even harder for the country to attract investments and boost its economy.
Sri Lanka's credit rating is still in the risky zone Moody’s has it at Caa1 (very high risk) and S&P recently rated it SD (Which is Selective Default). Basically, investing in Sri Lanka is already seen as a extremely risky gamble. Adding more taxes won’t help.
Stats suggest Sri Lanka won’t realistically hit developed country status until 2060 or later. Right now, the focus should be on making the country as attractive as possible to foreign investors. Unfortunately, these new tax policies do quite the opposite,
- Capital Gains Tax
The CGT on investments jumped from 15% to 30%.
For comparison, the US CGT is no more than 15%, and they're even talking about lowering it to encourage growth.
Doubling the CGT in Sri Lanka will scare off institutional investors who are already wary of the country’s financial and political instability.
- Corporate Tax
The corporate tax rate for certain industries (like betting, gaming, liquor, and tobacco) went up from 40% to 45%.
While it might sound good for boosting government revenue, it could choke struggling local businesses. High corporate taxes, combined with a steep CGT, make Sri Lanka a hard sell for investors.
- 18% Tax on Foreign Digital Services
An 18% tax on digital services like daraz, alibaba It’s essentially taxing the electronic market, making online transactions more expensive for businesses and consumers.
- Export Tax
Adding an export tax is just shooting ourselves in the foot. which is the on profits we earn from selling goods and services to other countries.
The US constitution outright bans export taxes for a reason, Compared to countries like India, Malaysia, Philippines, and Indonesia, Sri Lanka is becoming less investment worthy. These countries often offer far better tax breaks and incentives to investors.
- Brain Drain in industry
Sri Lanka doesn’t have a strong manufacturing sector to fall back on. Plus, skilled workers are leaving the country in extremely high numbers, Skilled labor is a extremely limited resource in Sri Lanka, and we’re losing it fast to immigration. Let’s be real Sri Lankan salaries are awful, and only foreign companies offer somewhat decent pay and better working conditions. Local companies pay some of the lowest salaries in the world. By raising taxes on foreign companies, we’re basically cutting the salaries of the last remaining skilled workers here, pushing them to migrate even more. This is just economic suicide. Without skilled labor, Sri Lanka will never move forward